Analysis and criticism of America's most prominent public intellectual and champion of Keynesian economics. I am part of the Austrian School of Economics, and I critique Krugman's writings from that perspective.

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Friday, April 12, 2013

Lust for Lying

As I have written many times before, Paul Krugman no longer is an economist, if he ever was one. Instead, he is a political operative, someone who gives partisan political rants and pawns it off as Deep Economic Thinking.

His recent column on gold and people who favor it is more of the same, and he once again impugns the character of anyone who might disagree with him on the subject. It is not enough for Krugman to have an intellectual disagreement; no, to disagree with him is to be evil:

Conservative-minded people tend to support a gold standard — and to buy gold — because they’re very easily persuaded that “fiat money,” money created on a discretionary basis in an attempt to stabilize the economy, is really just part of the larger plot to take away their hard-earned wealth and give it to you-know-who.

No doubt, the "you-know-who" would be African-Americans or some other minority. You see, according to Krugman, to favor gold as money is to be a racist, someone who hates others. (Krugman is permitted to hate and spew out hatred because he is part of the Favored Political Classes that have the NYT stamp of approval.)

Also, anyone who does not believe in Krugman's Inflation Fairy does so out of hatred, prejudice, and evil.

Furthermore, to oppose Federal Reserve money printing and its QE Forever programs is also to be racist and diabolical. Why? Because Krugman says so.

He proposes inflation as a policy to motivate investment . As well as being immoral, what he is suggesting is an economic model where arbitary investments are made to protect wealth rather than for an objective utility, and based on fake prices produced by changing the value of the unit of account. Its entirely abstract in its nature and isolated to the realm of numbers , rather than a real market of economic prosperity.

On interest rates and lending , Krugman contradicts his own explanation. Paul Krugman’s blog April 11 2013 “….But if rates are zero, there is no cost to liquidity, ….” Jan 20 2013…the Fed’s interest rate target isn’t a price control; there is no legal or other restraint on the rates lenders can charge ”

Krugman reveals himself as nothing more than a hate-spewing hack every time he opens his mouth, and it's getting really tiresome.

I'm also sick of his ongoing logical fallacy regarding (hyper-)inflation. "IT hasn't happened yet, therefore it's not going to happen." What the heck? That has the logic of the Underpants Gnomes...."Steal underpants....???....Profit!"

I dispute the notion inflation hasn't been a problem anyway. Headline CPI has been increasing an average of 2%-3% per year for several years now (up 50% since 1995), which is bad enough, and we know the "official" data understates what's happening in the Real World. Krugman, in his Ivory Tower at Princeton, doesn't have much of a clue about what's going on in the Real World, however.

...haven’t I been arguing that monetary policy is ineffective in a liquidity trap? The brief answer is that current policy is ineffective, but that you can still get traction if you can change investors’ beliefs about expected future monetary policy – which was the moral of my original Japan paper, lo these 15 years ago.

How is this not a "fairy" of sorts? Like, perhaps an "expectation fairy" to go along with the "inflation fairy". Since he favors them over the "confidence fairy" it seems he is dictating that only government-directed stimulus can generate the positive feedbacks in the private sector to get the economy going, while private-sector origins will always hang back and stash cash in mattresses and dividends until, well, it doesn't...

Let's start with you, Anderson"No doubt, the "you-know-who" would be African-Americans or some other minority.

The government! I read it as the government, or poor debtors. Its obvious to anyone who has a lick of sense!

Mule Rider

"I'm also sick of his ongoing logical fallacy regarding (hyper-)inflation. "IT hasn't happened yet, therefore it's not going to happen." What the heck? That has the logic of the Underpants Gnomes...."Steal underpants....???....Profit!"

I dispute the notion inflation hasn't been a problem anyway. Headline CPI has been increasing an average of 2%-3% per year for several years now (up 50% since 1995), which is bad enough, and we know the "official" data understates what's happening in the Real World. Krugman, in his Ivory Tower at Princeton, doesn't have much of a clue about what's going on in the Real World, however.

He's pointing out that those who have predicted hyper inflation SO CONFIDENTLY, like Peter Schiff and Marc Faber, have been wrong, wrong and wrong, again. And they haven't had a sense of humility, of questioning themselves (like Niall Ferguson regarding interest rates) No they continue to preach hyperinflation like nothing has happened.

Krugman is NOT saying that hyperinflation CAN NEVER HAPPEN! Read other parts of his blog. Once we are out of the liquidity trap, increasing the MB rapidly can once more lead to inflation. He says repeatedly that the LT won't last forever. you may dispute the LT, but dont misrepresent what he wrote.

Finally, headline CPI. Headline CPI is influenced by food and energy, and food and energy are heavily subsidized regulated and restricted by the government. Agro subsidies, anyone? Also, a lot of federal lands are off limits for drilling, both for NG and oil. Persistent government supply side restriction can lead tohigher than normal inflation.

But I though Austrians defined infaltion as an increase in the money supply? nominal gross domestic product, (ngdp) has been hovering around 2-3% growth, which is largely below historical trend. NGDP is roughly equivalent to the amount of money in circulation, which is the only thing that matters to directly impact prices and real growth, not simply money printing. You can't just say the Fed has increased M2 by 200%. So what? One hundred and ninety seven of it has probably been saved by the banks, who park their money at the Fed, or in risk free government securities. Its only money SPENT in the real economy that directly impacts prices

Conservative-minded people tend to support a gold standard — and to buy gold — because they’re very easily persuaded that “fiat money,” money created on a discretionary basis in an attempt to stabilize the economy, is really just part of the larger plot to take away their hard-earned wealth and give it to you-know-who.

Prof. Anderson wrote:

No doubt, the "you-know-who" would be African-Americans or some other minority. You see, according to Krugman, to favor gold as money is to be a racist, someone who hates others. (Krugman is permitted to hate and spew out hatred because he is part of the Favored Political Classes that have the NYT stamp of approval.)

Prof. Anderson's analysis is totally correct. Krugman, being utterly dishonorable, does not have the intellect or the honestly to explain why Austrians deny that discretionary funny money can be used to "stabilize the economy" -- It's because discretionary funny money is the CAUSE of economic destabilization by distorting the pricing process. Further, why does it matter who "you-know-who" actually is? The primary result of the funny money regime is that purchasing power is being unconstitutionally and immorally stolen without due process of law regardless of who is actually the beneficiary of the theft which is generally the cronies and political hacks of those in power. In our corrupt Klepto-Keynesian culture, more often than not, it is the rich and the elite.

Once again you prove your foolishness, Roddis along with all the other Rothbardian fanatics

"It's because discretionary funny money is the CAUSE of economic destabilization by distorting the pricing process. Further, why does it matter who "you-know-who" actually is? The primary result of the funny money regime is that purchasing power is being unconstitutionally and immorally stolen "

How can purchasing power, which exists in a relationship between person A's dollars, and the prices around him, belong only to person A. you can't say that it does. if a have five hundred dollars in my pocket on sunday, and Target and Walmart decide to raise their prices 3% on Tuesday, did they just ROB me of purchasingpower. Of course they didn't. Its their right to raise or lower prices as they see fit.

PURCHASING POWER CANNOT BE STOLEN BECAUSE IT ISN"T THE PROPERTY OF ONLY ONE PERSON.

i am sick and goddamn tired of hearing about Cantillion effects. They exist in a free market money economy too. Or in a gold standard. (which are NOT the same thing) So what?P.S.i predict Roddis will summon his usual pathetic, retarded response. You dont understand or haven't enagaged in Austrian concepts. no Bob, I have. Other people have. We have engaged Austrian concepts and found them seriously lacking

"Finally, headline CPI. Headline CPI is influenced by food and energy, and food and energy are heavily subsidized regulated and restricted by the government. Agro subsidies, anyone? Also, a lot of federal lands are off limits for drilling, both for NG and oil. Persistent government supply side restriction can lead tohigher than normal inflation."

Did you have a point to dispute there or did I miss it?

Yes, I mention headline CPI because, as ridiculous as it is, it's far better than the nonsense (and any stooge) who bothers to even talk about core CPI, which ignores food and energy. Dismissing price movements in those two sectors because of "volatility" or any other reason is beyond foolish as one cannot stay alive or maintain a standard of living on par with the early-1800s or later without them. And I firmly believe those 2%-3% average annual price increases reported by the government the past decade or more represent the BARE MINIMUM of what's actually happening.

Undermine and destroy the economy with floods of paper trash. Bravo, Keynesians and MMTers, the sheep will never see what hit them. And you bandits will probably find a way to scapegoat "the free market" when it all blows up in our face.

If that's your defense for the obvious purpose of funny money and how it "unconstrains" government, go for it. I'm quite happy to have you obfuscate about the obvious theft and transfer of purchasing without due process or permission of the victim. If a seller wants to raise prices, that's his business because the stuff he's selling belongs to him. If you don't like his prices, don't buy from him.

Like all Keynesians and "progressives" you are so dumb and morally challenged that you can't tell the difference between government theft and a price hike in a voluntary free market.

Many of you (I'm especially looking at Mule Rider) would be well advised to understand what CPI and inflation actually mean. Then you might understand why core (and chained) CPI are better measures than headline or the silliness at shadowstats.

Volatility is a great reason to keep food and energy out of CPI. Yes, it represents a good amount of consumer spending, and a spike in energy prices reduces consumer purchasing power. But it doesn't reflect actual erosion of the value of a buck. In recent years it may have been attributable to new demand from the BRICs, manipulation in the futures markets, or some combination of those and other things. We would be crazy to incorporate those commodities into monetary policy formulation. Or maybe you think the Chinese should include the Bitcoin as part of the basket of currencies they use for their peg.

It's really beyond me why anyone would want to return to a gold standard. I'm a little disappointed, really. I thought a blog written by an economics professor would focus more on that point than on a throwaway line like "you know who."

I'm not going to waste my time arguing with "progressives" about the morality of the government's use of funny money dilution to snatch and shift purchasing power from unknowing victims.

You either think that's outrageous or you don't. I just think it's important for average people to know that this is what is happening, and who the people promoting it are.

Further, since the market does not fail, the process does not help "stabilize" the economy. It simply accomplishes the snatching and shifting of purchasing power from unknowing victims. Average people (the further victims of government school brainwashing) should understand that.

"Then you might understand why core (and chained) CPI are better measures than headline or the silliness at shadowstats."

Have you actually read the material at shadowstats or are you just spouting off at the mouth based on your pre-conceived biases? In other words, why don't you make an actual critique of the work done there and try and refute it mathematically rather than simply decry it as "silliness." Talk about a "throwaway line."

"Volatility is a great reason to keep food and energy out of CPI."

WHy? Bold assertions don't make it true. Similar to your dismissal above, you need to bring something more to the table rather than just accept what you say on faith. Volatility, especially for NECESSARY items like food and energy, is not a good reason to discount them from price analysis. The over-arching trend is what matters. And based on that, we have been seeing average annual prices increases of roughly 2.5% since at least the mid-1990s. That's a roughly 50% increase when you look at it cumulatively.

Ignoring the trend line for some price series because it's up 10% one year, down 5% the next, in favor of one that gives you a nice little harmonic +0.5% to +1.5% range is pure idiocy and nothing more than head-in-the-sand analysis.

"If that's your defense for the obvious purpose of funny money and how it "unconstrains" government, go for it. I'm quite happy to have you obfuscate about the obvious theft and transfer of purchasing without due process or permission of the victim. If a seller wants to raise prices, that's his business because the stuff he's selling belongs to him. If you don't like his prices, don't buy from him. "

Right back atcha, bob.

"Like all Keynesians and "progressives" you are so dumb and morally challenged that you can't tell the difference between government theft and a price hike in a voluntary free market."

and like all austrian loonies, you completely miss the point. Its not theft at all because; 1, purchasing power doesn't solely belong to you, 2;The part that DOES belong to you can be protected, by buying stocks, gold, or inflation derivatives, and 3, what you are implying is the government's increase in money supply in response to an increased demand to hold it, is comparable to suggesting that Apple building more iphones, and the hypothetical iphone 6, STEALS value from owners of the iphone 4 and 5. Only a complete nitwit would make that argument. And that is what most of the Rothbardian fanatics on this blog are

Publius,

Right on.

Mule Rider, "Did you have a point to dispute there or did I miss it? "

(Sigh) My POINT is that you can't blame the Fed for increasing the headline CPI. The fed is only responsible for the money supply that changes hands throughout the economy. But if the government (not necessarily the Fed-you have to know whatpart of the government is causing what effect) resricts the supply of certain goods through regulations, (inflation is defined as too much money chasing too few goods this can happen both ways.)that can create persistent inflation. The Fed is not responsible for negative supply shocks.

Also, if you consider your paper money to be trash, please send some of it to me :-)

"(Sigh) My POINT is that you can't blame the Fed for increasing the headline CPI."

I don't recall making that argument. My point is that headline CPI, which should be considered a bare minimum barometer for price changes in the economy, indicates inflation has been a much bigger problem over the past decade or more than people have generally been willing to admit.

"Also, if you consider your paper money to be trash, please send some of it to me :-)"

It's not complete trash....yet. Namely because such an enormous share of the people are unthinking sheep who aren't paying attention. But once reality sets in - and it eventually will - paper money will be exposed for the fraud it is.

"Fill-in-the-blank still does not understand the concept of economic calculation..."

and then add a bunch of ad hominem and vague, condescending sentences to every non Austrian, even the monetarists.

I would have thought by now that at least one of you cement-heads would have actually taken a shot at understanding and explaining the concept economic calculation/miscalculation and the price distortions that result from funny money dilution. Apparently, you are all even more hopeless than I originally believed.

John Carney, the guy selected to moderate the Murphy/Mosler debate said this:

Let me explain why I think this important.

I’m not trying to shoot down the core insights of MMT. In fact, I find them extremely valuable to my reporting and analysis.

But there are some statements coming out of MMT that are highly misleading or confusing to people. Much of this confusion stems from the impression people get reading MMT blogs and papers that saving requires deficit spending. This is wrong, of course. But many smart, intelligent folks think this is what MMT is claiming.

So they dismiss it as nonsense.What I’ve been trying to do is explore what it is that makes people think this is an MMT claim and what must be said to clarify it.

Furthermore, I do think there’s a problem with MMT that cannot be confined to confusion.

The problem is as follows: MMTer are so focused on sectoral balances and the interaction between the private domestic sector and the public sector that they often downplay the intra-sector dynamics.

Finally, MMTers do not seem to fully appreciate the problems of ignorance and calculation that inform Austrian economics. They seem to recoil at even thinking about them because of the implications for the limits of political action. This also needs to be corrected.

You still violate so many basic laws of thought and logic which makes it hard for the average person to take you seriously. You wouldn't see Paul Krugman wasting time trying to troll blogs that promote Austrianism.

Have you actually read the material at shadowstats or are you just spouting off at the mouth based on your pre-conceived biases? In other words, why don't you make an actual critique of the work done there and try and refute it mathematically rather than simply decry it as "silliness." Talk about a "throwaway line."______________________________________________________________________

Think about your salary: do you get a temporary increase in salary over the summer when the price of gasoline rises due to increased travel and vacations? Then is that increase taken away when gas prices settle? Probably not, because your salary already accounts for the $x you need to support yourself and a $y margin of safety to protect you from volatility in necessary items.

If gas prices rise permanently (due to demand in developing countries), that will eventually be reflected in both your salary and the core CPI (the one without food and energy). A supermarket that used to sell tomatoes for $1 now sells them for $1.05 because of transportation costs, and the tomato winds up in core CPI.

Also, a common misconception about CPI is that it measures how much money a person needs in order to maintain their standard of living (meaning "to buy all the same stuff"). That's just not true. CPI's purpose is to measure the money required in order to maintain a constant level of utility, which allows for substitutions. For example, if you are used to buying Hershey bars and Hershey raises their prices, you could switch to Nestle chocolate bars and be equally happy. CPI assumes that some people will switch and some people wont, so CPI rises but not by the full extent of the rise in hershey bars. If all candy rose in price together at the same time it would definitely show in CPI. It is a lot more sophisticated than people give it credit for. (More detail in this paper from BLS: http://www.bls.gov/opub/mlr/2008/08/art1full.pdf)

Why is it that people who are so naturally skeptical of government can be so unquestioning when getting "data" from non-government sources? Yes, Government has an agenda, but then again so do people outside of government. But no, you'll reject anything put out by the Fed or BLS because of Government (scary!), and believe shadowstats because... well... he uses a lot of numbers and he's not the government. Remember that story about DHS buying thousands of "tanks," but it turned out to be an order for tactical vehicles for the Marine Corps? There's a lot of bad information and very crazy people in anti-government circles (just like in some pro-government circles), so don't blindly believe things because they're private sector. Do you also believe Barack Obama is Kenyan, the earth is 7,000 years old, 9/11 was an inside job?

You wanted some math, though, so here you go: 7 years ago, in 2006, a 1 year subscription to shadowstats cost $175. Today, a 1 year subscription costs $175. Either he is very altruistic or he doesn't believe the stuff he's selling.

Publius said: "CPI's purpose is to measure the money required in order to maintain a constant level of utility, which allows for substitutions"

Incorrect. CPI used to measure Constant Standard of Living which is the measurement of a fixed basket of goods. After material adjustments to the formula in the 80's and 90's and now proposed Chained or C-CPI, it measures a "utility" effect at increasing degrees. For example, if I derived my chief protein source from steak and because of its increasing expense I switch to hamburger, according the the "utility effect" I suffered no increase in protein. Next step down would be chicken then I suppose dog food. "Utility" is a fraud.

Williams has detailed and documented this extensively. If you are going to criticize you should know what you are talking about.

"Why is it that people who are so naturally skeptical of government can be so unquestioning when getting "data" from non-government sources?"

You mean, from a government whose history includes protecting the institution of slavery and later Jim Crow laws. Or the one that hunted down and brutalized the Native American tribes and later incarcerated Japanese-Americans during WWII for no good reason? The same one (via Lincoln) that suspended habeas corpus and tried to silence the press during the Civil War and committed numerous atrocities against Southern citizens and property? The same one that drug us into Vietnam and later into Iraq twice? And is still poking around in Pakistan and Afghanistan and has authorized spying on and attacking US citizens (via drones). That one? The same one that sends billions of taxpayer dollars into parts of the world we're unrepentantly hated. Or knowingly wastes billions of dollars on various domestic programs that are nothing more than scams and boondoggles. THAT government???

I'm sorry, but I find your level of naivete about our government and your erroneous missives about the CPI and inflation boring and beneath a minimum threshold of intelligence and insight that I'm willing to engage. You'll have to do much better than what you've put forth so far.

"You wanted some math, though, so here you go: 7 years ago, in 2006, a 1 year subscription to shadowstats cost $175. Today, a 1 year subscription costs $175. Either he is very altruistic or he doesn't believe the stuff he's selling."

Faulty logic. He could have be making better use of technology, broadened his customer base, and/or done any number of things to lower his average cost of providing the service to allow him to keep offering the same service (assuming it's the same...maybe he's reduced the level of service) at the same price 7 years later. Your comment also insinuates a lack of understanding of a very basis economic principle. You can't just pass along a higher price for a particular good or service, even if prices are generally increasing elsewhere in the market. There is a specific demand curve for the information/service he is offering there. It's up to him to try and charge an optimal price that people are willing/able to pay and maximizes revenue.

So either you didn't spend enough time thinking of a good example or you don't have the first clue about the topic you're trying to comment on.

"There's a lot of bad information and very crazy people in anti-government circles (just like in some pro-government circles), so don't blindly believe things because they're private sector. Do you also believe Barack Obama is Kenyan, the earth is 7,000 years old, 9/11 was an inside job?"

No, no, and mostly no....nice attempt at a straw man, though. Not everything coming out of the "private sector" is as extreme as you're trying to make it. You really think the birther movement is on par with rigorous mathematical analysis that demonstrates flaws in how the government calculates price changes in the economy?

Price changes in products are often related to changes in their production, improvements in processes that make them less expensive and allow their profitable sale at lower prices. On the other hand, there are some products that are made the same way they've always been and increase or decrease in price for other reasons. An interesting one is eggs. Eggs are crapped out by chickens pretty much as they've always been. Their price is tied to feed grain prices and, to some extent, as all products are, petroleum. In any event, midwest urban retail egg prices have gone from 82 cents a dozen in 1993 to $1.73 a dozen today, an increase of 111%. A certain percentage of this has to be attributed to devaluation of the dollar, not better or scarcer eggs.

Seeing this little item reminded me of one more thing to call you out about regarding your cynicism towards those who distrust government. What about the fact the DHS has been hoarding hundreds of millions of rounds of ammunition in recent months? Hell, what about the mere fact our government has established a military presence in nearly every corner of the world and that we spend more than the rest of the world combined on our armed forces? That's the kind of government that should be trusted?

"No, no, and mostly no...."

And elaborating on my "mostly no" comment from earlier, we don't know all the details of 9/11 - some are certainly shady - but there's solid evidence that some of the "big events" from the 20th century could fall under the banner of being a false flag operation.

Since Obama's mom is a white American woman, why do we care where he was born? McCain was born in Panama and George Romney (Michigan governor and father of Mitt) was born in Mexico.

What we do know is that Obama's mom worked for Timothy Geithner's dad in Indonesia for a CIA front group after the CIA coup there. I wouldn't be surprised if the "Obama is a Kenyan" thing was a false flag put out by the CIA just to get the dingbat Neocons to bite and ignore the actual truth.

"A certain percentage of this has to be attributed to devaluation of the dollar, not better or scarcer eggs."

Based on my job, I can attest to the fact that there has been genetic improvements in egg-laying hens that have vastly improved their productivity over the last 20 years, which would argue for cheaper prices. Your comments about feed grains, petroleum, and a devalued dollar are spot on then.

Peel off the skin and what you find are really conspiracy theory crazed conservatives!

Right. Like the Fed (mysteriously created a few years before) funding the US intervention in WWI?

Uber-Keynesian Daniel Kuehn’s paper has some excellent citations.

2. The austerity depression of 1920–21

During World War I federal expenditures ballooned and although the new income tax was able to partially finance the war effort, most of the financing was done through federal borrowing and by the highly accommodating monetary policy of the Federal Reserve. The role of the Federal Reserve at this time was expressed unambiguously by the New York Federal Reserve Bank Governor Benjamin Strong, who told a Congressional committee in 1921 that ‘I feel that I, or the bank at least, was their [the Treasury’s] agent and servant in those matters’ and further added that the wartime inflation caused by the low interest rates maintained by the bank were ‘inevitable, unescapable, and necessary’ for prosecuting the war (Strong, 1930).

However, after the war ended the deficit spending of the Wilson administration and the expansionary policy of the Federal Reserve were sharply curtailed to bring a halt to the inflation. By November 1919 the Wilson administration balanced the federal budget, slashing monthly expenditures by almost 75% in a matter of months.4 The New York Federal Reserve Bank raised the discount rate by 244 basis points over the course of eight months, with other Reserve System banks following suit. Shortly after these austerity measures were taken, the 1920–21 depression was under way. Postwar industrial production in the USA peaked in January 1920 as the economy moved into a major depression, with production levels dropping by 32.5% by March 1921.5 This loss in output is second only to the Great Depression in American economic history (Romer, 1999), although its duration was considerably shorter. Declines in output were matched by precipitous drops in employment and the price level. The proximate cause of the 1920–21 depression was a deliberate fiscal and monetary retrenchment following World War I.

Central banks facilitate wars. Doesn't matter which side either. Ever wonder why the almost every time a country abandons its gold standard is to fund a war it wants to fight? I'm sure that's lost on MMTers and Keynesian dupes.

If chained CPI used substitutions between steak and hamburger as a tool for lowering reported inflation then I would agree that it's wrong and manipulative. Unfortunately for you, you are wrong. Chained CPI allows some substitutions for items within the same category. Ice cream is a category, as is steak, as is hamburger. Steak and hamburger are not in the same category. If someone says they are, that person is misinformed. It's a common misconception, but that doesn't make it any less wrong.

The reason they do allow in-category substitution is because that is how people actually shop. And, when you're talking CPI, inflation, and macro in general you are talking about millions of decisions being made by millions of people. CPI is making an approximation of how the average consumer is behaving. Different segments of consumers behave differently, and chained CPI is not a great approximation for everyone. For seniors it drastically under-samples medical spending. Overall, though, it is a much better approximation of inflation as actually experienced by people. And isn't that what we are really after?

Chained CPI places emphasis on relative changes in prices for items that allow for constant utility. If the price of sirloin goes from $10-$20, some people with grumble and pay the difference, and that would raise CPI. Not everyone will do that. Most people don't care about sirloin, they just buy it because they've heard of it. So when they see that the price has gone up they'll just reach for chuck, or brisket, or whatever. The point is they want a steak and they don't necessarily care which one (on average). On average, due to substitution for equal products, the price of steak will have done up by maybe $2. Some people say this underestimates inflation, but it is valid and more correct than assuming people will continue to buy sirloin.

It should be noted as well that substitution does not always work in the government's favor (by lowering reported inflation). Staying within the steak category, let's say that with all the yuppies demanding grass fed steak more farmers grow their cattle that way and the price of grass fed beef comes down. If the price of grass fed steak gets cheaper and corn fed steak stays the same, more people will switch to grass fed. This is an example of how chained CPI would show an increase in inflation even when the price of a good came down. Either way, chained CPI is more correct.

Interesting though it is, it doesn't change the fact that going to a gold standard would be insane.

Also, wow. I was joking when I threw out the conspiracy stuff. Didn't expect to strike gold. Obama's mom worked for a CIA front? Nice. Lots of unanswered questions about 9/11? Drone strikes on American soil? DHS stockpiling ammunition? That one you can find on Snopes. Someday you'll have to transcribe the voices in your head. They say interesting things. On second thought, don't. If I thought what you thought I'd be scared of the world, too.

You are conflating "value" with a "store of value." No one complains that Wal-Mart is robbing them when it raises prices, because Wal-Mart cannot confiscate the commodity(s) acting as the value store(s). The government has that power and did confiscate that store. In return, it promises to emulate a stable store of value via the raising and lowering of interest rates.

Of course, the only reason it prefers that promise to an actual store of value is because actual stores of value are not sufficiently elastic.

It is interesting that you reach such a pique of anger over the presumed idiocy of those who do not make this fundamental error. It is a salient trait of the sophomore.

On the bright side, this makes you a temperamentally ideal Krugman acolyte.

Cato, don't be mad if you're not smart enough or moral enough to be a libertarian. Takes a lot of guts to give up the urge to control others and advocate freedom for all instead of yourself and cronies. Maybe more than you possess at the moment but keep trying.

Publius, What part of CONSTANT standard of living is so elusive to you. Your assumption of C-CPI changes being confined to the narrow categories is incorrect, but even if it was, it still fails the CONSTANT standard of living CPI used to measure pre 1980.

Even a reduction to to a lessor grade of stake breaks the discipline of CONSTANT.

Your prior citation of the validity of core CPI as an excuse for volatile food and energy components is nonsensical. Removing volatile items or weighing them less has merit for a month to month comparison, but the longer the period of time you are measuring, (i.e. year over year) the vlaidilty of that action vanishes and it becomes manipulation.

C-CPI is a fraud on top of the existing fraud of CPI. The quicker you understand that what is passed off a economic statistics by the government is really just political spin, the clearer things will become.

You're saying you're comfortable with how that story played out and was relayed to the American people by our government? No questions whatsoever? Perfectly fine with their version of events? Wow, you're much more of a naive, unthinking sheep than I perceived to be the case earlier in the conversation.

"Drone strikes on American soil?"

Perhaps you haven't been paying attention to the news for a few months (or years). And I love how you conveniently ignore the domestic spying and other infringements on the civil liberties of innocent US citizens.

"DHS stockpiling ammunition? That one you can find on Snopes."

You mean here - http://www.snopes.com/politics/guns/ssabullets.asp - where it lists the accusation as "partly true"? And given the atrocities committed by our government that I laid out above, if something like this is easily discerned as "partly true," it would take a serious lack of common sense to not hold our government's actions with a bit of skepticism.

"Someday you'll have to transcribe the voices in your head. They say interesting things. On second thought, don't. If I thought what you thought I'd be scared of the world, too.""

Ahh, the vacuous "tin foil hat" insult and predictably inept faux-psychoanalysis. Not to mention evading all the salient concerns I raised above. Unequivocal signs you've absolutely lost the argument and are just spewing nonsense to try and save face to prevent further embarrassing yourself.

Publius:Most people don't care about sirloin, they just buy it because they've heard of it. So when they see that the price has gone up they'll just reach for chuck, or brisket, or whatever. The point is they want a steak and they don't necessarily care which one (on average).

You obviously don't spend much time in a kitchen nor associate with people who do. I suppose that might be why you have such a condescending attitude toward other people.

I cannot believe there are people in the world who think that the government engaging in deliberately devaluing the medium of exchange and forcibly haircutting all holders of it, is no different to a producer raising prices of a good in a free market. There is also the issue that without constant monetary expansion price indexes if anything deflate over time. Oh, I know, things getting cheaper is really bad...Nevertheless, despite Krugmans voice in the wilderness routine, the Keynesians hold sway at the moment with regard to policy. The silver lining to all this when it has played out, and it will eventually, is that Keynesian claptrap economic theories and the Krugmans who peddle them will be totally discredited, and be a global laughing stock as they attempt their revisionist explanations of how they got it so wrong (again)

"Also, a common misconception about CPI is that it measures how much money a person needs in order to maintain their standard of living (meaning "to buy all the same stuff"). That's just not true. CPI's purpose is to measure the money required in order to maintain a constant level of utility, which allows for substitutions. For example, if you are used to buying Hershey bars and Hershey raises their prices, you could switch to Nestle chocolate bars and be equally happy. CPI assumes that some people will switch and some people wont, so CPI rises but not by the full extent of the rise in hershey bars. If all candy rose in price together at the same time it would definitely show in CPI. It is a lot more sophisticated than people give it credit for."

To those leveling what I believe to be unwarranted criticisms of Bob Roddis,

I have been reading Bob's comments on several websites for several years and have personally found him to be quite intelligent, courageous and tenacious. I believe these are admirable qualities in a human being. Is it possible you have closed your minds to some very fundamental aspects of economic life, properly defined, and mistaken or distorted Bob's position in these matters?

" (...) The over-arching trend is what matters. And based on that, we have been seeing average annual prices increases of roughly 2.5% since at least the mid-1990s. That's a roughly 50% increase when you look at it cumulatively. (...)"

Exactly! and that overarching 2ish% trend (which is what we informally mean by "inflation") seems to be well captured by "core" CPI ... which is exactly the purpouse of that metric!!!

lets cut the crap, the real "technical" reason one argues for changing this or that well established metric is to try to approximate the conclusions to your own political prejudices... or do you argue we also had massive deflation circa 2009?

Government Spending is the Biggest Game in town!!Already gearing for the future with the false additional incorporation into the so called GDP!Krugman is nothing but the continued mouthpiece of the forever free money future with no accounting for debt!!So, Just who really is behind the monkey?

About Me

I teach economics at Frostburg State University in Frostburg, Maryland. We are located on the Allegheny Plateau, and we have cool summers and tough winters.
I am the single father of five children, four of them adopted from overseas and I have two grandchildren. My family and I are members of Faith Presbyterian Church (PCA).